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JAMA Forum Archive, 2012-2019: Health policy commentary from leaders in the field
JAMA Forum

The Political Third Rail of Controlling the Soaring Costs of Health Care

As the 2012 presidential election approaches, the political debates on health care reform are consistently confused, often conflating the critical dimensions of any well-functioning health care system: access, equity, cost, quality, and choice.

Lawrence Gostin, JD

The Obama administration’s health reform law, the Affordable Care Act (ACA), addresses each of these key dimensions but at its core revolves around access—and access was also the factor most at play in the Supreme Court’s decision on the ACA. A factor that is now dominating the political debates, particularly with respect to the contentious question of Medicare reform, is the issue of cost.

American politicians rarely want to examine or learn from other health systems around the world, a particularly troubling manifestation of American exceptionalism. However, many national health systems—ranging from the United Kingdom’s National Health Service to Canada’s single-payer and Germany’s multiple-payer systems—achieve equal, if not more favorable, health outcomes at roughly half the cost.

How do these countries and many others control health care costs while the United States has been unable to do so? Putting it simply, there are principally 3 ways to make fundamental inroads on controlling cost: (1) creating a national health budget that requires that services fit within the overall resource limit, (2) linking evidence of effectiveness to payment for services, and (3) using the government’s purchasing power to negotiate lower prices for pharmaceuticals (and even having a list of “essential medicines” that are the only ones the government will purchase). Both of the major US political parties reject these broad measures, although the Democrats often nod in the right direction.

Using the "R Word"

First, an overall health budget is anathema in the United States because it implies the need to ration services, and use of the “r word” stifles intelligent debates. In the real world, every government service needs to be fairly allocated; there is no such thing as an unlimited “public good.” The United States does ration health services, of course, but does so principally on the ability to pay—perhaps the most unfair method of allocation.

Second, cost-effectiveness that is linked to reimbursement is a political third rail in the United States. Republicans have frequently made “death panel” charges at even the weakest form of service allocation based on cost-effectiveness. How any rational political leader genuinely concerned with the health of the population at an affordable price could reject the idea of knowing which treatments work (and which ones do not) is beyond me. What would be wrong with tying funding to treatments that achieve the best health outcomes—something that almost every other developed country accepts? At the very least, we would want to have all the available evidence about whether any given health expenditure was worth the cost.

Finally, the United States fails to use its enormous purchasing power to negotiate lower drug costs. In fact, US law prohibits Medicare and other payers from doing so. The US government also is not permitted to import pharmaceuticals from Canada or other countries that have lower drug costs. The reason for proscribing the use of government’s purchasing power may be understandable because higher prices create greater incentives for pharmaceutical companies to innovate. However, what this policy in effect is doing is forcing the United States to subsidize pharmaceutical prices in other countries. Multinational companies charge the United States more for the same drug sold in most other countries.

Where Do the Parties Stand?

Beyond the rhetoric, where do the political parties actually stand on lowering cost? The Republicans believe that greater market competition will drive costs down, against all the evidence. For one thing, consumers have no basis on which to realistically compare health care’s value. Moreover, when individuals become ill, they lose their ability to become cost-conscious consumers. For the most part, they simply follow their physician’s advice. The Democrats, through the ACA, have pursued the idea of Accountable Care Organizations, which manage complex chronic conditions. The ACA also establishes innovative demonstration projects, such as on cost-effectiveness. These policies could potentially control cost but only at the margins.

Instead of dealing with the new technologies, drug prices, and unlimited patient choices that are fundamental drivers of soaring costs, the parties offer confusing and distracting proposals that won’t fix the problem. Even talking about controlling cost in Medicare draws the ire of a powerful political bloc, the elderly. Thus, each party points the finger and charges the other party with reducing the Medicare budget, a measure that is exactly what needs to be done, but in a rational way. The upshot is that the burden of cost control is placed on those least able to bear it, poor individuals who receive health coverage through Medicaid. Through all this noise, the debates on soaring costs will likely continue for decades as health care costs continue to take an ever-larger bite out of the US gross national product.

About the author: Lawrence Gostin is University Professor and Faculty Director, O’Neill Institute for National and Global Health Law, Georgetown University Law Center, and Director of the World Health Organization Collaborating Center on Public Health Law and Human Rights.